PPOs & Practice Transitions

As published in The Profitable Dentist, Summer 2015

One has to consider many factors when purchasing a practice and now PPO participation has to be taken into account. This becomes even more important when you’re dealing with practice mergers. It is increasingly common to see exiting practices not sold outright but sold to and blended with another practice. I have worked with many of my clients through this merger process and have described below some scenarios to illustrate the high stakes involved.

Example: A practice purchases another practice that’s participating in a large PPO that the purchasing practice isn’t. Does the buyer join that PPO for the sake of having a smoother transition?

Continuing with this example, let’s say you’re a Delta Premier provider. In many parts of the country, patients with Delta Dental insurance have the option of going to a Delta Premier provider and getting that level of benefits or going to a Delta PPO provider where they have the incentive of even further reduced co-payments.

If you are a Delta Premier Provider (the “Regular Delta” – not with Delta PPO) and you buy a practice that’s with Delta PPO, those patients will experience a transition as they blend into your practice. This has to be handled tactfully or the patients whom you are assuming the care of will bounce out of the practice. On the other hand, if you join Delta PPO and have a lot of regular Delta Premier patients, you will experience steeper discounts on patients you already have. This can be terrifically expensive, even more expensive than the actual practice purchase in some cases.

Even worse is going into the situation without knowing what PPOs in which each practice participates. Sometimes the owners of a practice don’t even know for which plans they are providers. This is particularly true with PPO networks like Dentemax, Connection, DHA and others that include multiple insurance companies. For example, you may be contracted directly with MetLife or you might be indirectly contracted through one of these PPO network groups.

If you’re purchasing a practice that has a lot more PPO participation than you do, you and your staff have to be ready to take these patients through transition (much as if you were leaving a PPO). However, this is more delicate because you don’t have patient loyalty working for you (yet). On the other hand, when you purchase another practice, you’re “topping off” yours, and it puts you in a better position to dump PPOs and take some patient loss. As you can see, all this can be quite complex.

Another scenario: The practice you’re purchasing participates with the same PPOs. Okay, but you want to compare both practices’ PPO fee schedules. PPOs do pay different doctors differently! The practice you’re purchasing might be getting better reimbursements on the same PPO than you are (or vice versa). Obviously, you would want to negotiate with the PPO (if you’re going to participate) to ensure that you get the better fee schedule of the two for continued participation, even if you are bringing the selling doctor over.

If you’re not doing a merger but an outright practice purchase, it’s very important to get a specific list of all the PPOs the selling doctor is participating with and the fee schedules. Of course, you want to look at all practice write-offs too. Some practices don’t do a good job of itemizing the write-offs so it’s hard to track how many are due to the various PPOs.

Before purchasing a practice, you may want to call the relevant PPOs and negotiate the fee schedules in advance. If you’ve gone ahead and purchased a practice, you have an opportunity very early in the credentialing process to negotiate. PPOs tend to be a bit more willing to negotiate before you sign up.

A practice purchase can be a great way to go. It offers a much quicker start or move in your career than building from a scratch. There is less risk and more predictability.

Practice mergers can be the best deal in dentistry. If the conditions are right, practice mergers are THE very best way to build your practice. This typically consists of absorbing an older doctor’s practice into yours with, perhaps, the older doctor working in your practice for a while through the transition phase.

In conclusion, If you are buying a practice (outright or in a merger), the right “PPO Plays” can make many, many thousands of dollars difference to your bottom line. No smart buyer will overlook the PPO situation.

Bill Rossi is president of Advanced Practice Management. He and his associates are actively involved in the ongoing management of over 250 Upper Midwest dental offices. You may contact Bill at 952-921-3360 or through www.AdvancedPracticeManagement.com.